Yesterday, the U.S. dollar defended its important support zone, halting its drop and putting pressure on metals.
Gold responded with a textbook pullback, but now it’s decision time: either the bulls reclaim momentum, or the bears take us lower.
The USD Index
Yesterday, the dollar tapped the green support zone and bounced, just like we anticipated. The result? A textbook hammer candle: small body, long tail, signaling a potential short-term reversal fueled by demand pressure from below.
Sounds bullish? At first glance: yes.
But here’s the catch: DX.F still remains capped below the rising wedge and the key 100.00 barrier. Until that ceiling is cleared, this bounce may just be a pause not a pivot.
Zooming into the microstructure, the dollar just hit its first local resistance created by the previous swing highs and the 38.2% Fibonacci retracement of the recent decline.
Additionally, momentum indicators flashing warning signs:
- CCI is approaching overheated territory
- Stochastics are already overbought and curving down
- RSI flirting with resistance near 60
All the above paints two near-term possibilities:
- Pullback scenario: a rejection here could send DX.F back toward 99.10–99.20 zone or even to around yesterday’s low.
- Breakout test: if buyers push through and price closes above the red descending channel… things will change.
Key upside levels to watch if bulls push through:
- 99.49 -> the 38.2% Fibonacci retracement
- 99.65-99.67 -> the 50% Fibo + the black declining resistance line
- around 99.76 -> Nov. 28 highs + the bearish engulfing formation
- 99.81-99.86 -> the 61.8% Fibo + Nov.25/Nov.26 highs (+2 bearish engulfing patterns)
Bearish scenario?
- watch 99.30-99.34 -> recent lows + 38.2% Fibo (based on recent upswing)
- below that: 99.23 (50% Fibo), 99.16 (61.8% Fibo), 98.96-99.06 (yesterday’s lows)
My takeaway: the bounce was expected. The rejection? Still on the table. This is a reaction zone - not confirmation of trend reversal. Let the market show its hand. Today’s close matters more than today’s high.
And now… let's see how gold (GC.F) responded.
The gap zone we discussed yesterday was fully filled, confirming the shift in the very short-term control to sellers and triggering a decline under the next support zone (highlighted in yesterday’s Lab Note #19).
Thanks to this move, today’s session saw a short-lived drop below the 50% retracement of the latest swing from 4150, approaching the price to the next important support zone (4200-4208) and encouraging bulls to step in.
But can they take control?
We’re seeing early bullish signals on both CCI and Stochastics plus (as mentioned earlier) the USD just hit its first intraday resistance. That creates a setup for a potential bullish breakout, but only if buyers can break above the upper line of the red declining wedge visible on H1.
If they can, we’ll likely see a move to at least 4252.85-4259.70 (today’s opening gap). If the buyers close it, the next target could be around 4281-4284 (78.6% of the last swing + the wedge target area marked with blue).
If they can’t (rejection from the wedge), we’ll likely see a test of the above-mentioned green support zone 4200-4208). However, a potential break below 4200 opens the path to 4172–4182 where the 38.2% retracement of the entire mid-November rally is.
Levels to Watch:
- Resistances: 4242 / 4255 / 4275–4280
- Supports: 4200 / 4172–4182
My takeaway: the pressure is building. Don’t front-run this. Let the wedge (in gold) and the first resistance zone (in the index) decide.
Another dot connected. Another trail unfolding. See you on the next chart.
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Trading Lab Founder